Columnist Ken McCall: Homeowners forced to sign away rights to associations

Ken McCall

Monday, Feb. 10, 1997 | 11:59 a.m.

THE TROUBLE WITH homeowners associations is that deep down Americans don't believe in them.

They're not founded on liberty and justice for all.

They're not founded on the proposition that all men are created equal.

And they're definitely not founded to ensure domestic tranquility.

What homeowners associations are designed to do is protect property values.

Period.

Well, their first purpose is to get quick planning approval and sell lots of real estate, but after the units are sold, the primary aim of those voluminous covenants, conventions and restrictions (CC&Rs) to which every association member must bow is to make everyone keep up with the Joneses.

This may not sound like a bad thing to many homeowners. But in the process, many fundamental rights that Americans hold dear -- or at least miss when they're gone -- are signed away.

Little things like private property rights, due process and access to government.

Because, let's face it, these associations are mini-governments, dictating a whole range of lifestyle restrictions that public agencies can't even look at. Imagine the city council prohibiting you from playing in your back yard or washing your car in the driveway.

Now, I know board members and property managers and all those other folks in the Community Associations Institute (CAI) will claim that owners do have rights and due process and access. But those rights are a pale reflection of what we've come to expect from our democratic institutions.

First, the rules aren't written by a duly elected body, but by a developer looking to market his product. There are standard sets of rules and bylaws, but those were also heavily influenced, if not primarily written, by developers.

Second, the government is elected by the property owners. Renters are disenfranchised in this democracy.

Third, the board not only levies the fines for breaking the rules, but it also functions as the judge and jury for appeals. This doesn't sound like due process to most folks who have been through it.

Fourth, changing the rules often requires impossibly high "super-majorities," such as 75 percent of all eligible voters. Since association elections rarely get close to 50 percent turnout, the rules are effectively carved in stone.

Another problem is that enforcement is entrusted to unpaid amateurs. There are no qualifications to take on the position, which not only confers extraordinary power over the neighbors, but also responsibility for large sums of money.

Though many boards have highly qualified members, it's becoming increasingly obvious to almost everyone that many are highly unqualified.

Says attorney Scott Canepa, a member of the CAI legislative committee: "Most people don't understand what they're taking on."

"People are going to do the best they can with the training and experience they have, which a lot of times isn't the greatest."

As a result, many boards hire "experts" -- property managers or consultants or lawyers -- to advise them. And one of the first defenses against liability that boards learn from their experts is something called the "Good Business Judgment Rule."

In most states, including Nevada, the Good Business Judgment Rule protects boards from liability for errors as long as they act in good faith. Part of acting in good faith, according to just about anyone in the association business, is enforcing the rules.

"People resent people telling them what to do," says Gail Gouker, director of the Nevada chapter of the CAI.

"They'll say, 'How dare you tell me not to wash my car in the driveway? Who do you think you are?' But it's spelled out in your CC&Rs. ... The board has the responsibility to enforce that."

In his much-cited book "Privatopia," Evan McKenzie traces the influence of such professional advice: "Board members are routinely advised to be extremely aggressive and inflexible in the enforcement of CC&Rs, a practice that produces enormous hostility against boards on the part of those who are censured or fined."

The reasoning boils down to a domino theory: If you let anyone break any rule, pretty soon everyone will be breaking all the rules.

In practice, however, the reasoning apparently often devolves to rationalization: If you act like a human being to one person, you might have to act like a human being to everyone.

As a result, neighbors don't talk to each other to resolve problems. Instead, board members write anonymous, threatening warnings and levy fines.

Serving on the board takes a lot of time and energy, everyone rightly points out. And while many people agree to serve for selfless reasons, it's obvious from the calls to this office that many others enjoy what McKenzie calls "the perceived pleasure of wielding power over others."

Part of the defense of the Good Business Judgment Rule is that associations aren't -- and shouldn't -- try to be true democracies.

Says attorney Canepa: "On a continuum between government, they're closer to a business. Board members are running a company. These are nonprofit corporations, they're not a democracy. Somebody has to make decisions."

And that's the rub:

While they have corporation-like bylaws, homeowners associations are much more than corporations, in which investors aren't involved or affected by day-to-day management decisions. If a board decides to rip out lawn and substitute gravel as a cost-saving move, it's more than business to the residents. If a board decides to begin strict enforcement of a rule prohibiting any playing on common areas, it affects more than the property values of families with children.

But association members aren't just neighbors, either. They're bound by contract into what McKenzie calls an "involuntary political community."

Worse, they're a community with a constitution in conflict with the surrounding political climate. That conflict is resulting in increasing public -- and legislative -- scrutiny.

So, as long as boards operate as dictatorial, corporate oligarchies in a land dedicated to life, liberty and the pursuit of happiness, the horror stories, ugly confrontations and lawsuits will continue.

If association boards and members want to live in harmony, they -- and the people who are paid to advise them -- had better figure out how to do it the American way.